Those reading are NOT typical Americans.
You are taking charge of your financial health and because of that, hopefully, your savings rates, investment balance, and annual income have grown exponentially since the pandemic. Not to mention double-digit home growth in several hot spots. Now you deserve to revenge spend a little and at this moment Americans still seem unbothered by soaring prices.
But uncertainty is once again on the horizon but possibly for a better reason due to inflation, not deflation this time. According to a Bank of America survey, Americans not only have higher median savings but higher cash balances than pre-pandemic!
Yet everything is relative in finance. There’s always some data out there to counteract the hopeful news you just read. Pushing big bank recession fears aside, according to data from across the pond from FRED, record savings rates of 20% from 2020–2021 quickly plummeted to 6% this year.
This is concerning given Americans still haven’t learned their lesson from March 2020 to plan for the worst, and hope for the best during good times not only the tough ones. With an extra buffer on the sides at all times, it will save you no matter what. Luckily, if you own your home in full, you’ve already won.
Movers
Prospective financially secure homebuyers or those who are financially secure during a high-interest rate environment will be the main contenders to move. With higher rates already in effect, this is pushing out marginal buyers for cashed-up buyers alleviating supply and demand in the process. But it all takes time and the hot housing market is expected to not cool down until 2023.
Back to relativity in finance.
With increased mortgage rates alongside increased costs for homeowners, this will free up supply and prices for cashed-up buyers in a less speculative frothy market, yet with low inventory, that will only drive prices higher. Since selling is arguably harder than buying due to the fees, transfer costs, and taxes, time will only tell for how high prices will go until they get counterbalanced.
And for the rest of us, it’s best to be a nester for a while even if you have regrets about your pandemic purchase as millions of Millennials do.
With the average homeownership rate of ~10.5 years, this is a considerable rise after the financial crisis of 08 and owners have realized its powerful benefits.
Interestingly enough, in cities, not only is the divorce rate lower, but the average homeownership tenure is longer at around 10 years. With rising rates, the homeownership length should increase for much higher than 10 years given the low supply on deep discounts and not terrific refinancing options available.
Although city dwellers, especially, New Yorkers aren’t known to be patient, when it comes to homeownership, they have one of the longest track records, mainly due to moving expenses. Plus if you plan on moving in less than 5 years, it’s oftentimes better to rent and for New Yorkers they are here for the long haul, mainly for employment.
Their lengthy homeownership tenure certainly explains their focused goal on capital preservation and above-average wealth to survive in the city.
Home Bound
Throughout the nation, homeownership tenure rates are highly correlated in higher populated locations, mainly cities. Unsurprisingly, the more expensive the residence, the higher rate of retention. Although city residences are known to be more expensive per square foot and smaller, it seems to not bother current homeowners who look for excitement and life outside of their primary residence.
Post lockdown, homeowners across the country have been learning from city dwellers’ lifestyles, venturing out and spending less time at home while their cabins appreciated in the meantime. This is another reason homeownership rates last longer in cities because of the opportunities outside of home. Smaller units = less maintenance and time spent repairing as well!
You will never hear people in cities say they are stuck on the couch or have cabin fever since they have better reasons to live in the city than Netflix and Chill. Costs savings aren’t abundant so residents focus on the opportunities outside, most prominently on their careers instead of on the parking lot and backyard.
Personally, as a 1st generation immigrant of European descent, I’ve found while American homes have only gotten bigger over the years, Europeans have always preferred smaller units, most popularly apartments or townhouses. Although owning physical land is a precious non-fungible asset, without less owned greenery, Europeans still report higher rates of happiness while living in half the size units. There’s so much more to life outside of our homes that I hope you take advantage of safely this summer!
There’s a lot to learn from Europeans’ and city dwellers’ way of living. From cost savings to efficiency, there’s a true bargain if you hunt for it. After all who doesn’t want to follow the secrets of the healthiest and happiest? Isn’t that better than the rich and famous with their mega-mansions stuck in their fenced L.A. yard?
Plus who needs to spend so much time at home when real life is outside!
With massive subscription fatigue from Netflix virtually erasing all of its meteoric pandemic gains from the past 5 years to at-home stocks battered, original content to backyard water parks will be a hard sell when entertainment, travel, tourism, and of course, brighter, longer, and warmer days are ahead!